SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

[X]  Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act
             of 1934. For the quarterly period ended: June 30, 2004

                                       OR

[_]  Transition Report Under Section 13 or 15(d) of the Securities Exchange Act
                   of 1934. For the transition period from: to

                       Commission File Number: 000-030813

                                  AlphaRx, Inc.
                 (Name of Small Business Issuer in its Charter)

         Delaware                                       98-0177440
(State or other jurisdiction of            (I.R.S. Employer Identification No.)
incorporation or organization)


                         168 Konrad Crescent, Suite 200
                        Markham, Ontario, Canada L3R 9T9
                    (Address of principal executive offices)

       Registrant's telephone number, including area code: (905) 479-3245

        Securities registered pursuant to Section 12(b) of the Act: None

           Securities registered pursuant to Section 12(g) of the Act:
                         Common Stock, $.0001 par value
                                (Title of Class)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes [X]  No  [ ]


The number of outstanding shares of registrant's Common Stock on August 13, 2004
was 40,773,122.

Transitional Small Business Disclosure Format.  Yes [ ]  No [X]


<PAGE>


                                  ALPHARX, INC.

                                   FORM 10-QSB

                                  JUNE 30, 2004


                                TABLE OF CONTENTS


       Interim Consolidated Balance Sheets as of June 30, 2004 and
           September 30, 2003                                                 1

       Interim Consolidated Statements of Operations for the nine
           months ended June 30, 2004 and June 30, 2003                       3

       Interim Consolidated Statements of Operations for the three
           months ended June 30, 2004 and June 30, 2003                       4

       Interim Consolidated Statements of Shareholders' Deficiency
           for the nine months ended June 30, 2004 and
           the year ended September 30, 2003                                  5

       Interim Consolidated Statements of Cash Flow for the nine
          months ended June 30, 2004 and June 30,  2003                       6

       Condensed Notes to Interim Consolidated Financial Statements           7

         Management's Discussion and Analysis of Financial Condition
                and Plan of Operation                                        10


         Other Information                                                   15








<PAGE>




                                  ALPHARX, INC.

                       INTERIM CONSOLIDATED BALANCE SHEETS

                   AS OF JUNE 30, 2004 AND SEPTEMBER 30, 2003
                                   (UNAUDITED)

                                     ASSETS




<TABLE>
<CAPTION>

                                                                June 30,     September 30,
                                                                  2004            2003
CURRENT ASSETS
<S>                                                        <C>              <C>
   Cash                                                    $       12,707   $       24,520
   Accounts Receivable                                             17,283           27,662
   Deferred financing costs                                       184,999               --
   Prepaid Expenses                                               123,653            3,690
   Inventory                                                      121,392          141,905


     TOTAL CURRENT ASSETS                                         460,034          197,777


PROPERTY, PLANT & EQUIPMENT, at cost

         Less accumulated deprecation of $110,476
                                                                                   222,962
            Less accumulated depreciation of $79,097              126,535

OTHER ASSETS

   Licensing Rights                                                     1          230,000
                                                                --------           -------





TOTAL ASSETS                                                      682,997          554,312
                                                                =========          =======
</TABLE>


See condensed notes to the consolidated financial statements

                                                                               1

<PAGE>

                                  ALPHARX, INC.

                       INTERIM CONSOLIDATED BALANCE SHEETS

                   AS OF JUNE 30, 2004 AND SEPTEMBER 30, 2003
                                   (UNAUDITED)

                    LIABILITIES AND SHAREHOLDERS' DEFICIENCY


<TABLE>
<CAPTION>
                                                                  June 30,     September 30,
                                                                    2004            2003
CURRENT LIABILITIES

<S>                                                              <C>            <C>
   Accounts Payable and Accrued Liabilities                      $   527,964    $   254,724
   Notes Payable                                                   1,475,810        474,837
   Litigation Liabilities                                             25,000         25,000
                                                                 -----------    -----------

        TOTAL CURRENT LIABILITIES                                  2,028,774        754,561
                                                                 -----------    -----------

SHAREHOLDERS' DEFICIENCY

Common Stock, $ 0.0001 par value,                                      1,703          1,692
   Authorized 100,000,000 shares, issued and outstanding
   17,020,082 shares
  (September 30, 2003 - 16,920,082)
Additional paid-in capital                                         4,054,029      4,024,039
Deficit                                                           (5,401,509)    (4,225,980)

TOTAL SHAREHOLDERS' DEFICIENCY                                    (1,345,777)      (200,249)
                                                                 -----------    -----------

TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIENCY                       682,997        554,312
                                                                 ===========    ===========
</TABLE>


See condensed notes to the consolidated financial statements                  2



<PAGE>


                                  ALPHARX, INC.

                  INTERIM CONSOLIDATEDSTATEMENTS OF OPERATIONS

             FOR THE NINE MONTH PERIOD ENDED JUNE 30, 2004 and 2003
                                   (UNAUDITED)


<TABLE>
<CAPTION>
Nine Months Ended June 30,                                       2004            2003

<S>                                                         <C>             <C>
SALES                                                       $    371,694    $      3,739

COST OF SALES                                                    148,046           2,830
                                                            ------------    ------------

             GROSS MARGIN                                        223,648             909

GENERAL AND ADMINISTRATIVE, SALES AND                            975,381         804,524
MARKETING  EXPENSES
RESEARCH AND DEVELOPMENT EXPENSES                                162,568         183,569
DEPRECIATION                                                      31,301          20,990
                                                            ------------    ------------

         LOSS FROM OPERATIONS                                   (945,602)     (1,008,174)
                                                            ------------    ------------

OTHER INCOME AND EXPENSES
            Interest Income                                           72               2
            Other Income                                              --          10,000
            Write down of Licensing Rights                       229,999              --
                                                            ------------    ------------

LOSS BEFORE INCOME TAXES                                      (1,175,529)       (998,172)

INCOME TAX                                                            --              --
                                                            ------------    ------------


NET LOSS                                                    $ (1,175,529)   $   (998,172)
                                                            ============    ============

NET LOSS PER COMMON SHARE, BASIC & DILUTED                         (0.07)          (0.06)
                                                            ============    ============

WEIGHTED AVERAGE NUMBER OF COMMON                             17,002,866      16,102,014
SHARES OUTSTANDING                                          ============    ============
</TABLE>


See condensed notes to the consolidated financial statements                  3


<PAGE>

                                  ALPHARX, INC.

                  INTERIM CONSOLIDATEDSTATEMENTS OF OPERATIONS

             FOR THE THREE MONTH PERIOD ENDED JUNE 30, 2004 AND 2003
                                   (UNAUDITED)



<TABLE>
<CAPTION>
Three Months Ended June 30,                                         2004            2003

<S>                                                            <C>             <C>
SALES                                                          $      9,084    $      1,241

COST OF SALES                                                         1,861             587
                                                               ------------    ------------

             GROSS MARGIN                                             7,223             654

GENERAL AND ADMINISTRATIVE, SALES AND MARKETING EXPENSES            377,394         161,562
RESEARCH AND DEVELOPMENT EXPENSES                                   122,323          28,281
DEPRECIATION                                                         11,739           8,858
                                                               ------------    ------------

         LOSS FROM OPERATIONS                                      (504,233)       (198,047)
                                                               ------------    ------------

OTHER INCOME AND EXPENSES
            Interest Income                                              72              --
            Other Income                                                 --          10,000
         Write down of licensing rights                                  --              --
                                                               ------------    ------------


LOSS BEFORE INCOME TAXES                                           (504,161)       (188,047)

INCOME TAX                                                               --              --
                                                               ------------    ------------

NET LOSS                                                       $   (504,161)   $   (188,047)
                                                               ============    ============

NET LOSS PER COMMON SHARE, BASIC & DILUTED                            (0.03)          (0.01)
                                                               ============    ============

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING             17,020,082      16,632,770
                                                               ============    ============
</TABLE>

See condensed notes to the consolidated financial statements                  4

<PAGE>


                                  ALPHARX, INC.

           INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS'
                                   DEFICIENCY
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                            Common Stock                    Additional      Retained                      Total
                             Number of                         Paid-in      Earnings              Shareholders'
                              Shares          Amount           Capital      (Deficit)       Equity (Deficiency)

<S>                         <C>               <C>            <C>           <C>                          <C>
         Balance as of      15,327,341        1,533          2,897,277     (2,811,383)                  87,427
         September 30,
         2002

         Issuances of        1,592,741          159            846,168                                 846,327
         Common
         Stock

         Issuance of Stock                                     280,594                                 280,594
          Options for consulting services

         Net loss for the                                                  (1,414,597)             (1,414,597)
         Year ending
         September 30,
         2003
                             ---------------------------------------------------------------------------------
         Balance as of      16,920,082        1,692          4,024,039     (4,225,980)               (200,249)
         September 30,
         2003

         Issuance of
         Common Stock          100,000           11             29,990                                  30,001

         Net loss for the
         Nine month period
         Ending June
         30, 2004                                                          (1,175,529)             (1,175,529)
                             ---------------------------------------------------------------------------------

         Balance as of
         June 30, 2004      17,020,082        1,703          4,054,029     (5,401,509)             (1,345,777)
                             ---------------------------------------------------------------------------------
</TABLE>

See condensed notes to the consolidated financial statements                  5


<PAGE>

                                  ALPHARX, INC.

                  INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
             FOR THE NINE MONTH PERIOD ENDED JUNE 30, 2004 AND 2003
                                   (UNAUDITED)

<TABLE>
<CAPTION>
Nine months ended June 30,                                                       2004           2003
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                           <C>             <C>
Net Loss                                                                      (1,175,529)     (998,172)
Adjustments to reconcile net loss to net cash used in operating activities:
    Depreciation                                                                  31,301        20,990
    Write down of licensing rights                                               229,999            --
    Shares issued for services rendered                                           30,001       273,436
    Options issued for services rendered                                         280,594
        Changes in assets and liabilities:
        (Increase) decrease in inventory                                          20,513       (67,948)
        (Increase) decrease in accounts receivable                                10,379        (1,702)
        Increase in prepaid expenses                                            (119,963)      (12,017)
        Increase in deferred financing costs                                    (184,999)           --
        Increase (decrease) in accounts payable and accrued liabilities          273,240        25,933
                                                                              ----------    ----------
NET CASH USED IN OPERATING ACTIVITIES                                           (885,058)     (478,886)
                                                                              ----------    ----------

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investments                                                               --      (250,000)
Purchase of property, plant & equipment                                         (127,728)      (17,992)
                                                                              ----------    ----------
NET CASH USED IN INVESTING ACTIVITIES                                           (127,728)     (267,992)
                                                                              ----------    ----------

CASH FLOWS FROM FINANCING ACTIVITIES
Issuance (repayment) of notes payable                                          1,000,973       216,682
Proceeds from issuance of common stock                                                --       572,891
                                                                              ----------    ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES                                      1,000,973       789,573
                                                                              ----------    ----------

NET INCREASE (DECREASE) IN CASH                                                  (11,813)       42,695

CASH (bank indebtedness), beginning of period                                     24,520        (9,202)
                                                                              ----------    ----------

CASH, end of period                                                               12,707        33,493
                                                                              ----------    ----------
</TABLE>


See condensed notes to the consolidated financial statements                  6

<PAGE>

                                  ALPHARX, INC.

              CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2004
                                   (UNAUDITED)

NOTE 1. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The accompanying  unaudited consolidated financial statements have been prepared
in accordance  with the  instructions  to Form 10-QSB and do not include all the
information and footnotes required by generally accepted  accounting  principles
for complete financial statements. In the opinion of management, all adjustments
(consisting   of  all  recurring   accruals)   considered   necessary  for  fair
presentation  have been included.  Operating results for the interim periods are
not  necessarily  indicative  of the results  that may be expected  for the year
ended  September  30,  2004.  Interim  financial  statements  should  be read in
conjunction with the Company's annual audited financial statements.

NOTE 2. NATURE OF BUSINESS AND GOING CONCERN

ALPHARX,  INC.  (the  Company) was  incorporated  under the laws of the State of
Delaware on August 7, 1997.  The company is an emerging  pharmaceutical  company
specializing in the formulation of therapeutic  products using  proprietary drug
delivery   technologies.   The  company  was   formally   known  as  LOGIC  TECH
INTERNATIONAL,  INC.,  and had its corporate name changed during the fiscal year
of 2000.

Effective July 1, 2003 the Company  acquired all of the shares of AlphaRx Canada
Limited for nominal value of $1.  AlphaRx  Canada Limited was dormant until this
time. AlphaRx Canada Limited was incorporated under the laws of Ontario in order
to streamline sales of the Company's  products in the Canadian market.  Prior to
this time AlphaRx Canada Limited had no material  assets or any  liabilities and
was  wholly  owned  by the  President  & CEO of the  Company.  The  consolidated
financial statements reflect the activities of the Company and of AlphaRx Canada
Limited - its wholly owned subsidiary.  All material  inter-company accounts and
transactions have been eliminated.

The accompanying consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of  liabilities  in the  normal  course of  business.  Accordingly,  they do not
include any  adjustments  relating to the  realization  of the carrying value of
assets or the amounts and  classification of liabilities that might be necessary
should the company be unable to continue as a going concern.  Continuance of the
company as a going concern is dependent on its future  profitability  and on the
on-going support of its shareholders, affiliates and creditors.


                                       7
<PAGE>

NOTE 3 PROMISSORY NOTES AND DEFERRED FINANCING COSTS

The Company issued senior secured  convertible  promissory notes to 10 investors
during  February and March,  2004 in the  aggregate  amount of  $861,000.  These
promissory  notes are subject to voluntary  conversion  into common stock at any
time at a price of $0.15 (fifteen cents) per share. Under certain  circumstances
the promissory  notes are convertible  into common stock at a lesser  conversion
price.  In addition,  holders of the promissory  notes are entitled to warrants,
exercisable up to 3 years from conversion date, to acquire an additional  number
of shares of common stock  varying from 50% of the common  stock  acquired  upon
conversion  and up to 300% of the common stock acquired upon  conversion.  These
promissory notes are secured by a lien on substantially all of the assets of the
Company. See also subsequent event below.

In connection  with the promissory  notes for $861,000,  and any funds raised in
the future,  the Company is liable for a fee to its placement agent equal to 10%
of the gross  proceeds.  Accordingly,  $86,100  has been  recorded  as  deferred
financing costs with respect to funds raised to date.

During  April,  2004 the Company  issued an  aggregate  of $300,000 of unsecured
promissory  notes under  terms and  conditions  substantially  the same as those
described  above,  but such promissory  notes are unsecured and have an interest
rate of 5%. The fees payable to our  placement  agent in  connection  with these
promissory notes are equal to 10% of the gross proceeds received and are payable
at the election of the placement agent in cash or units  consisting of one share
of common stock and a warrant to purchase an additional share of common stock at
a stipulated  value of $0.15 per unit of common  stock,  together  with warrants
exercisable  at $0.15 per share for a number of shares of common  stock equal to
10% of the shares of common stock issued upon the conversion of such  promissory
notes. See also subsequent event below.

The remainder of the deferred  financing  costs relate to legal fees, and escrow
fees in  connection  with the private  placement  completed in July,  2004.  See
subsequent events note below for further detail.

NOTE 4. LICENSING RIGHTS

The Company acquired world-wide exclusive commercialization rights for VT-1 from
Select  Therapeutics Inc. in January 2003 with the intention of  commercializing
this drug.  Subsequent to this  acquisition  the Company  successfully  launched
Flexogan in Canada,  and shifted  focus on drug delivery  products,  and related
sales  and   marketing.   Having   unsuccessfully   attempted  to  resell  these
commercialization  rights,  they have been written  down to a nominal  value due
primarily to prohibitive development costs, and the fact that there is no market
for these rights.


                                       8
<PAGE>

NOTE 5. LITIGATION LIABILITY

The Company is a defendant in a lawsuit filed by a prospective investor alleging
breach of contract,  which seeks damages totalling $25,000. The Company believes
the suit is without merit; however, to remain conservative, the entire claim has
been accrued in the financial statements.

NOTE 6. SUBSEQUENT EVENTS

On July 21, 2004 the Company issued  20,000,700  shares of Common Stock at $0.15
per share for  gross  proceeds  of  $3,000,105.  The  Company  also  issued,  in
connection with the private placement, warrants to purchase 20,000,700 shares of
Common Stock at $0.30 per share.  The  warrants  have an expiry date of July 21,
2007.  The Warrant is subject to  mandatory  redemption  at a price of $0.01 per
underlying  share of Common Stock if the Common Stock trades for 10  consecutive
days at a price at or above $0.90 per share.

On July 21, 2004,  in connection  with the private  placement  mentioned  above,
certain convertible  promissory note holders elected to convert their promissory
notes into shares of Common  Stock and  warrants  to  purchase  shares of Common
Stock at $0.30 per share.  Promissory  Notes  plus  accrued  interest  totalling
$375,234 were converted  into 3,752,340  shares of Common Stock plus warrants to
purchase  7,504,678 shares of Common Stock. It is anticipated that all remaining
convertible  promissory  note holders,  other than those mentioned  below,  will
convert their notes into Common Stock plus warrants to purchase shares of Common
Stock. There remains outstanding  $500,000 in convertible  promissory notes plus
accrued interest as at July 21, 2004.

During July, 2004,  unsecured  promissory notes plus accrued interest  totalling
$304,708 were repaid from the proceeds of the private  placement of Common Stock
mentioned above.


                                       9
<PAGE>

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF
OPERATION

The following  discussion and analysis  should be read in  conjunction  with the
Financial  Statements,  including  the  Notes  thereto,  appearing  in this Form
10-QSB.  Except for the historical  information  contained  herein the foregoing
discussion   contains   forward-looking   statements   that  involve  risks  and
uncertainties.  Our actual results could differ  materially from those projected
in the forward-looking statements discussed herein.

GENERAL

AlphaRx is a drug delivery company specializing in the development of innovative
therapeutic products for the pharmaceutical and consumer health care market. Our
core competence is in the development of novel drug formulations for therapeutic
molecules or compounds  that have  exhibited  poor G.I.  absorption  due to poor
solubility  or have yet be  administerable  to the human body with an acceptable
delivery  method.  Our drug delivery system is versatile and offers  significant
flexibility  in the  development of suitable  dosage  formulations  (i.e.  oral,
topical or parenteral) to meet the requirements of specific drug molecules.  Our
primary  activities  since inception  (August 7, 1997) have been, in addition to
research and  development,  establishing  our offices and  research  facilities,
recruiting personnel, filing patent applications, developing a business strategy
and  raising  capital.  During  2003 and 2004 we have also  started  to focus on
commercialization of our products and to that extent Flexogan product sales have
commenced in the Canadian market.

We  acquired  the  world-wide  exclusive  commercialization  rights of VT-1 from
Select Therapeutics Inc. in January,  2003. Given our recent retail launching of
Flexogan(TM),  and our new focus on drug  delivery  products and plans to evolve
into a sales and marketing  organization,  we have determined that VT1 no longer
meets  our  strategic  objective  and  the  VT1  program  has  been  terminated.
Resultingly,  the VT-1  commercialization  rights  have been  written  down to a
nominal value.

We launched Flexogan, a series of over-the-counter topical analgesics, in Canada
during  August,  2003.  We  expect  Flexogan  to  incur  significant   marketing
expenditures in 2004 in order to promote national sales and gain market share in
Canada as well as a pre-launch in U.S.

We signed a licensing  agreement  with  Andromaco  Inc. in August,  2003 for the
commercialization of our lead pharmaceutical  products "Indaflex"(TM) in Mexico.
The  Company  will  receive  royalties  from  product  sales.  We do not  expect
marketing  approval from the Mexican health  authority until at least the fourth
quarter of 2004.  In order to market and sell  Indaflex  products  in the US and
Canada,  we will require  successful  completion of human and clinical trials as
well as FDA approval. We expect these trials to commence in early 2005.


                                       10
<PAGE>

We intend to continue investing in the further  development of our drug delivery
technologies and to actively seek  collaborators and licensees to accelerate the
development and  commercialization  of products  incorporating our drug delivery
systems.   Depending  upon  a  variety  of  factors,   including   collaborative
arrangements,  available personnel and financial  resources,  we will conduct or
fund  clinical  trials  on such  products  and  will  undertake  the  associated
regulatory activities.



RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED JUNE 30, 2004 AS COMPARED TO
THE NINE MONTHS ENDED JUNE 30, 2003

The Company  incurred a net loss of  $1,175,529  for the nine month period ended
June 30, 2004 as compared to a loss of $998,172  incurred  for the same period a
year ago, an increase of $177,357 or approximately 18%. Included in the net loss
for the nine  months  ended  June 30,  2004  was a one time  write  down of VT-1
licensing rights in the amount of $229,999.  Having unsuccessfully  attempted to
resell these commercialization  rights, they have been written down to a nominal
value due primarily to prohibitive development costs, and the fact that there is
no market for these rights.

The Company has generated noticeable gross margins for the first time this year,
derived from the sale of Flexogan  products.  Gross margins of approximately 60%
or $223,648  were  generated  from sales of $371,694  for the nine month  period
ended June 30, 2004. Loss from Operations was $945,602 for the nine month period
ended June 30,  2004 as compared to  $1,008,174  incurred  for the same period a
year ago, a reduction of $62,572 or approximately 6%.

SALES

Sales for the nine  months  ended June 30,  2004 were  $371,694  as  compared to
$3,739 generated for the same period a year ago, an increase of $367,955. During
the first three quarters of our fiscal year we placed our Flexogan products with
three  national  retail chains  including  Shoppers Drug Mart Ltd.,  and Loblaws
Companies  Ltd. The market for arthritic and muscle pain creams,  which Flexogan
is addressing,  is competitive,  and additional marketing expenditures will have
to be incurred in order to increase  revenue growth and gain  additional  market
share.

GROSS MARGIN

Cost of Sales for the nine month  period  ended June 30,  2004 was  $148,046  as
compared  to $2,830  incurred  for the same period a year ago.  Resulting  Gross
Margin increased to $223,648 or approximately  60% of sales as compared to Gross
Margin of $909 or approximately 24% of sales for the same period a year ago.

SALES AND MARKETING, GENERAL AND ADMINISTRATIVE EXPENSES

Sales and Marketing,  General and  Administrative  expenses consist primarily of
sales and marketing expenditures,  personnel costs related to general management
functions,  finance, inventory logistics, office overheads, as well as insurance


                                       11
<PAGE>

costs and professional fees related to legal,  audit and tax matters.  Sales and
Marketing,  General and  Administrative  expenses for the nine months ended June
30, 2004 were  $975,381 as compared to $ 804,524  incurred for the same period a
year ago, an increase of $170,857 or approximately 21%.

Approximately  $447,000 or 46% of these  expenses  incurred  for the nine months
ended June 30, 2004  related to  marketing  of Flexogan in Canada.  We expect to
continue  with sales and  marketing  expenditures  in order to  establish  brand
awareness, and increase market share, as well as introduction of new products in
the future.

The  remainder of these  expenses  incurred for the nine month period ended June
30, 2004 related to legal expenses,  professional  fees,  finance  charges,  and
other office overheads.  We expect that general and administrative  expense will
increase moderately over the near term.

RESEARCH AND DEVELOPMENT EXPENSES

Research  and  development  expenses  include  costs for  scientific  personnel,
supplies, equipment, outsourced clinical and other research activities.

Research and  development  expenses for the nine months ended June 30, 2004 were
$162,568  as compared  to  $183,569  incurred  for the same period a year ago, a
decrease of $21,001 or approximately  11%. The decrease results primarily from a
reduction of science staff costs when compared to the same period a year ago.

We expect to increase  research and  development  expenses over the remainder of
2004  as we  accelerate  the  development  and  testing  of  our  Indaflex  drug
candidate.

LOSS FROM OPERATIONS

Loss from  operations  were  $945,602 for the nine months ended June 30, 2004 as
compared  to a loss of  $1,008,174  incurred  for the same  period a year ago, a
decrease of $62,572 or  approximately  6%. Gross  margins of $223,648 as well as
reduced staff costs helped to offset net increases in other operating  expenses.
Those increases result primarily from increases in marketing  expenditures where
approximately  $447,000  was incurred for the nine months ended June 30, 2004 as
compared to approximately $17,000 incurred for the same period a year ago.

LIQUIDITY AND CAPITAL RESOURCES

As at June 30, 2004 the Company had a working  capital  deficiency of $1,568,740
compared  to $556,784  as at  September  30,  2003.  The bulk of the  deficiency
relates  to  promissory  notes  plus  accrued  interest  outstanding   totalling
$1,475,810.

Since inception, we have financed operations principally from the sale of Common
Stock and issuance of  promissory  notes and expect to continue this practice to
fund our ongoing activities.



                                       12
<PAGE>

We currently do not have sufficient resources to complete the  commercialization
of  any of  our  proposed  products  or to  carry  out  our  business  strategy.
Therefore,  we will likely need to raise substantial  additional capital to fund
our  operations in the future.  We cannot be certain that any financing  will be
available when needed.  Any additional  equity financings may be dilutive to our
existing shareholders, and debt financing, if available, may involve restrictive
covenants on our business.

We expect to continue to spend capital on:

1. research and development programs;
2. preclinical studies and clinical trials;
3. regulatory processes; and
4. third party manufacturers and marketing partners to manufacture and market
   our products for us.

The amount of capital we may need will depend on many factors, including:

1. the progress, timing and scope of our research and development programs;
2. the progress, timing and scope of our preclinical studies and clinical
trials;
3. the time and cost necessary to obtain regulatory approvals;
4. the time and cost necessary to establish sales and marketing capabilities or
to seek sales and marketing partners to market our products for us;
5. the time and cost necessary to respond to technological and market
developments; and
6. new collaborative, licensing and other commercial relationships that we may
establish.

The  inability  to raise  capital  would have a material  adverse  effect on the
Company. We currently have no capital commitments other than the payment of rent
on our facilities lease, and for certain research equipment.

CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS

Certain   of  the   information   contained   in   this   document   constitutes
"forward-looking statements", including but not limited to those with respect to
the future revenues, our development strategy,  involve known and unknown risks,
uncertainties, and other factors which may cause our actual results, performance
or achievements to be materially different from any future results,  performance
or achievements  expressed or implied by such forward-looking  statements.  Such
factors include,  among others,  the risks and  uncertainties  associated with a
drug delivery company which has not commercialized our first product,  including
a history of net losses, unproven technology,  lack of manufacturing experience,
current and  potential  competitors  with  significant  technical  and marketing
resources,  need for future capital and dependence on collaborative partners and
on key personnel.  Additionally,  we are subject to the risks and  uncertainties
associated  with  all  drug  delivery  companies,   including   compliance  with
government regulations and the possibility of patent infringement litigation, as
well as those factors  disclosed in our  documents  filed from time to time with
the United States Securities and Exchange Commission.


                                       13
<PAGE>

ITEM 3. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES.

      The Company's  management,  with the  participation of the Company's Chief
Executive Officer and Chief Financial Officer has evaluated the effectiveness of
the Company's  disclosure  controls and procedures as of June 30, 2004. Based on
this  evaluation,  the Company's  Chief  Executive  Officer and Chief  Financial
Officer  concluded  that the Company's  disclosure  controls and  procedures are
effective for gathering, analyzing and disclosing the information the Company is
required to disclose in the reports it files under the  Securities  Exchange Act
of 1934, within the time periods specified in the SEC's rules and forms.


                                       14
<PAGE>

PART II: OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

Farhad Walji vs.  AlphaRx,  Inc. and AlphaRx Canada Limited filed in the Supreme
Court of British  Columbia on August 23,  2002.  Farhad  Walji has filed a claim
asking for $25,000 plus interest for allegedly  providing  $20,000 pursuant to a
subscription  agreement to purchase common shares of AlphaRx's stock and damages
resulting  from lost  opportunity.  The Company has denied any liability in this
case and is currently defending this action vigorously.  Nonetheless,  the value
of the entire claim has been accrued in our  financial  statements  as a current
liability.

ITEM 2 - CHANGES IN SECURITIES AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY
SECURITIES

No shares of common stock were issued during the three months ended June 30,
2004.

The Company issued senior secured  convertible  promissory notes to 10 investors
during  February  and  March,  2004 in  exchange  for the  aggregate  amount  of
$861,000. These promissory notes are subject to voluntary conversion into common
stock at any time at a price of $0.15 (fifteen  cents) per share.  Under certain
circumstances the promissory notes are convertible into common stock at a lesser
conversion  price. In addition,  holders of the promissory notes are entitled to
warrants,  exercisable  up to 3  years  from  conversion  date,  to  acquire  an
additional number of shares of common stock varying from 50% of the common stock
acquired  upon  conversion  and up to 300% of the  common  stock  acquired  upon
conversion. These promissory notes are secured by a lien on substantially all of
the assets of the  Company.  In  connection  with these  promissory  notes,  the
Company is liable  for a fee to its  placement  agent  equal to 10% of the gross
proceeds, payable in cash or in-kind securities at the election of the placement
agent. These securities were sold in reliance on the exemption provided by Rules
506 of Regulation D under the Securities Act of 1933.

Between  March 31, 2004 and April 6, 2004,  the Company  issued an  aggregate of
$300,000 of unsecured promissory notes to 3 investors under terms and conditions
substantially  the same as those described  above, but such promissory notes are
unsecured  and  have an  interest  rate of 5%.  These  securities  were  sold in
reliance  on the  exemption  provided  by Rules  506 of  Regulation  D under the
Securities Act of 1933.  During July,  2004 the Company repaid these  promissory
notes plus accrued interest totaling  $304,708 in aggregate,  from proceeds of a
private  placement of Common Stock described below.  Commission in the amount of
10% of the  principal is payable to the  placement  agent in the form of cash or
in-kind securities at the election of the placement agent.

Following  the end of the period  covered by this  report,  on July 21, 2004 the
Company  issued  20,000,700  shares  of  Common  Stock  for  gross  proceeds  of
$3,000,105,  plus warrants to purchase an additional 20,000,700 shares of Common
Stock at $0.30 per share.  These warrants expire July 21, 2007.  These shares of
Common Stock and warrants were issued pursuant to Rule 506 of Regulation D under


                                       15
<PAGE>

the Securities Act of 1933.  Gross proceeds were used to repay  promissory notes
mentioned  above and the  remainder of the proceeds are to be used for advancing
Indaflex development, and other general corporate purposes.


On July 21, 2004,  certain note holders  converted  $375,234 of promissory notes
plus accrued interest into 3,752,340 shares of Common Stock.  These note holders
also received warrants to purchase 7,504,678 shares of Common Stock at $0.30 per
share. These warrants expire July 21, 2007.

As a result of the above  transactions  the  Company  had  40,773,122  shares of
Common Stock outstanding as at July 21, 2004.  Additionally,  there are warrants
outstanding to purchase 31,501,177 shares of Common Stock, ranging in price from
$0.10 to $1.10 and  expiring  between the period  December 19, 2004 and July 21,
2007.



ITEM 3 - DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4 - OTHER INFORMATION

None.

ITEM 5 - EXHIBITS AND REPORTS ON FORM 8-K

(a) EXHIBITS.

      31.1  Certification   of   C.E.O.   Pursuant   to   Section   302  of  the
            Sarbanses-Oxley Act of 2002.
      31.2  Certification   of   C.F.O.   Pursuant   to   Section   302  of  the
            Sarbanses-Oxley Act of 2002.
      32.1  Certification  of Michael Lee pursuant to Section 1350 of Chapter 63
            of Title 18 United States Code.
      32.2  Certification  of Marcel Urbanc  pursuant to Section 1350 of Chapter
            63 of Title 18 United States Code.

(b) REPORTS ON FORM 8-K

         Not applicable


                                       16
<PAGE>

                                   SIGNATURES:


      Pursuant to the  requirements of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized.

DATED: August 13, 2004


                                               ALPHARx, INC.

                                              By:    /S/ Michael M. Lee
                                                  ----------------------------
                                              Michael M.  Lee, Chief Executive
                                              Officer


      Pursuant to the requirements of the Securities  Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant,  in
the capacities, and on the dates, indicated.

DATED: August 13, 2004

                                              Directors:


                                                     /S/ Michael M. Lee
                                                    -------------------------
                                                    Michael M.  Lee, Director


                                                     /S/ David Milroy
                                                    -------------------------
                                                    David Milroy, Director


                                                     /S/ Ford Moore
                                                    -------------------------
                                                    Ford Moore, Director


                                       17